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Downsizing Blog

We are being bombarded with sensationalist stories in the press about state and local governments having to “slash” programs because of a lack of revenues. These stories typically revolve around the question of whether the federal government will continue supplementing “essential services” provided by state and local government.

President Obama is proposing to give the states another $50 billion. However, that would amount to another bailout for state and local government employees and their unions. The president claims that more deficit spending is necessary to sustain the nascent economic recovery. But the only thing the money would sustain is the excessive wages and benefits government employees enjoy at the expense of the private sector.

President Obama has instructed federal agencies to come up with spending cuts equal to five percent of their discretionary budgets for fiscal year 2012. The 2012 fiscal year doesn’t begin until October 2011. Why wait ?

We argued in October that “regime uncertainty” was stifling the economy’s ability to recover. Businesses are more reluctant to invest or hire when Washington pursues a policy agenda that could be detrimental to their bottom lines. The phrase was coined by economist Robert Higgs who observed that FDR’s anti-business policies prolonged the Great Depression.

In the mid-1990s, Amtrak president Thomas Downs claimed that the perpetually taxpayer-dependent railroad was “on a glide path to profitability.” In reality, Amtrak was on a glide path to bankruptcy without continuing taxpayer subsidies.

Paul Light, an expert on the federal bureaucracy, has written a thoughtful essay in the Wall Street Journal that examines several cost-cutting efforts the government should undertake. Light suggests saving hundreds of billions of dollars by trimming managerial fat, eliminating positions through attrition, and making government employees more productive. He also suggests eliminating duplicative functions and unproductive programs such as agriculture subsidies.